In a recent analysis of the accounting mergers and acquisitions (M&A) landscape, the trends for 2024 suggest an overwhelming influx of private equity funding that continues to reshape the sector. With a focus on 132 deals involving 212 accounting firms, the findings published by Accounting Today shed light on the current dynamics of the market and forecast what the future may hold.
Throughout 2024, private equity has taken a commanding lead in the accounting M&A sphere, signalling a time of significant activity and transformation. Notable transactions include the $2.3 billion megamerger between CBIZ and Marcum, which was finalised in November. This deal exemplifies a broader trend wherein top players are swiftly acquiring niche firms, creating ripples of both excitement and apprehension within the small-to-midmarket space. Some partners have expressed discontent regarding external capital's growing influence in the sector.
In examining recent mergers, various firms have demonstrated targeted expansion strategies. The acquisition of Shilts CPA by Dean Dorton on December 5 and LBMC's addition of Frazee Ivy Davis in Memphis continue the trend of firms seeking to enhance their market positions. Citrin Cooperman has also been active, purchasing Clearview and Signature Analytics in mid-November, signalling a relentless pursuit of growth.
Moreover, smaller firms are participating in the expansion narrative as well. The merger between BerryDunn and Burzenski & Co. in Connecticut on December 1, along with LGA's acquisition of McGaunn & Schwadron in early December, illustrates a trend towards deepening industry specialisation, notably in veterinary and dental niches. Additionally, KNAV Advisory's minority investment on November 18 highlights efforts to foster a global presence in an increasingly competitive environment.
The report further notes that mid-market and regional firms are seizing the opportunity to acquire specialty shops in burgeoning areas such as cannabis and human capital. For example, BeachFleischman and Indiva Advisors merged on November 4, while EY and Jubilant collaborated on human capital on November 11. The pattern indicates a preference for PE-backed platforms stacking bolt-on deals to create full-service powerhouses capable of meeting diverse client needs.
Looking ahead, five key predictions are emerging for 2025:
Hyper-specialisation will dominate: Firms are expected to focus on ultra-niche areas, such as AI-driven forensic accounting, potentially leaving generalists struggling to keep pace.
Open architecture models will flourish: CPA firms are likely to establish partnerships with registered investment advisors (RIAs), enterprise resource planning (ERP) consultants and even legal advisors, evolving into comprehensive advisory powerhouses.
Cross-border micro-mergers will increase: The analysis anticipates a rise in global mini-deals, similar to KNAV's merger with HLG Netherlands, as firms seek unique talent and clients across borders.
Tech-centric valuations will take precedence: The analysis indicates that proprietary data analytics or AI tools will play a significant role in influencing deal pricing, overshadowing traditional business metrics.
PE-backed succession solutions will emerge: External capital is expected to transform the landscape of partner retirements from potential liabilities into strategic exit or growth opportunities.
In this evolving environment, some firms will find these developments advantageous, offering paths to scale and differentiation, while others may face challenges in adapting to the changing landscape. The findings reflect a significant shift in how the accounting sector approaches growth and specialisation, highlighting the importance of innovation and adaptation.
Source: Noah Wire Services